Q.No.

Question Options Answer

1. Internal scale economies

2. Internal scale diseconomies

When the firm's average cost falls as the firm's output (scale)
1. 3. External scale economies 1
rises, this is called:

4. External scale diseconomies

5. -

1. When each country produces both goods for the domestic market

2. When each country produces one good for the domestic market

With internal scale economies and similar factor endowments,

2. 3. When both counties specialise in one good and supply to both markets 3
beneficial trade between two countries occurs when:

4. Each country produces the good in which it has comparative advantage

5. -

1. 0

2. 0.5

When a country only imports or only exports then the intra -

3. 3. 0.75 1
industry index equals:

4. 1

5. -

1. Large firms have an advantage over small firms

2. Small firms have an advantage over large firms

External economies of scale are beneficial for firms. Under

4. 3. Both small and large firms gain comparative advantage 3
these conditions, which of the following is true:

4. None of the above

5. -

1. Monopolistic competition

2. Perfect competition

Non- traded goods are characteristic feature of which of the

5. 3. Monopoly 4
following:

4. High transportation costs

5. -

1. Increase in stocks of K and L

2. Technological progress

Economic growth leads to an upward shift in the production

6. 3
frontier of a country. This is because of which of the following: 3. Both (a) and (b)

4. Neither (a) nor (b)

5. -

1. Export prices decrease

2. Import prices decrease

In Balanced growth, income effect is positive (for both large

7. 3. Population increases 4
and small countries) under which of the following conditions:

4. Labour force participation increases

5. -
8. When a large country experiences Balanced growth, the effect 2
on the trading partner would be: 1. Positive Income Effect

2. Positive Terms of Trade Effect

 3. Negative Income Effect

4. Negative Terms of Trade Effect

5. -

1. Export expanding

2. Import expanding
Growth of a country's labour endowment increases the output
of the labour intensive good relative to the capital intensive
9. 3
good. If a country imports the labour intensive good then it is 3. Import replacing
a:
4. Export replacing

5. -

1. Positive income effect

2. Negative income effect

Growth of a country's capital endowment affects the per -

10. 3. Positive for large country and Negative for small country 1
capita consumption in which of the following way:

4. 0 Income effect

5. -

1. High Capital - Labour ratio

2. Low Capital - Labour ratio

Labour saving technical progress leads to which of the

11. 3. Upward shift in Isoquant (parallel) 1
following:

4. Downward shift in Isoquant (parallel)

5. -

1. Gain to capital owners in A

2. Gain to Immigrants in A

The effect of labour migration from County B to Country A

12. 3. Negative net effect on B 4
leads to which of the following:

4. All of the above

5. -

1. Overall net gain to Country A

2. Overall net gain to County B

The effect of capital mobility from Country B to A leads to

13. 3. Both (a) and (b) 3
which of the follwoing:

4. Neither (a) nor (b)

5. -

1. Ad valorem

2. Specific tariff

When the imported value of a product is low, which of the

14. 3. Complex tariff 2
following accords high protection:

4. Tariff rate quota

5. -
15. When weighted average tariff level of country is higher than 3
simple average tariff, the following is true: 1. Tariff reduce across the products

2. Tariff increase across the products

3. High tariffs and high import value products

4. High tariffs and low import value products

 5. -

1. Domestic consumption is met by domestic supplies

2. Autarky prices

16. Prohibitive tariffs leads to which of the following: 3. Both (a) and (b) 3

4. Neither (a) nor (b)

5. -

1. Consumer surplus is transferred to producers

2. Consumer surplus is transferred to Government

In a small country framework, tariff always results in a net

17. 3. Consumer surplus is transferred to foreign exporters 4
welfare loss. This is because:

The production and Consumption efficiency loss is not offsetted by transfers to

4.
producers or government

5. -

1. The dead weight losses are less than the terms-of-trade effect

2. The dead weight losses are higher than terms-of-trade effect

In a large country framework, tariff can result in a net welfare

18. 3. The dead weight losses are equal to terms-of-trade effect 1
gain under which of the following:

4. The dead weight losses are equal to the transfers to the domestic producers

5. -

1. Transfer of consumer welfare to producers

2. Transfer of consumer welfare to producers and Government

Tariffs lead to redistribution of welfare. A decrease in tariff

19. 3. Transfer of producer welfare to consumers 4
results in which of the following:

4. Transfer of producer and government welfare to consumer

5. -

1. Exceeds the nominal tariff protection on the commodity

2. Equals the nominal tariff protection on the commodity

When the production of a commodity does not utilize imported

20. 3. Is less than the nominal tariff protection on the commodity 2
inputs, the Effective tariff protection on the commodity:

4. Increases the nominal tariff protection on the commodity

5. -

1. Effective tariff rate more than the Nominal tariff rate

2. Effective tariff rate less than the Nominal tariff rate

When a government allows raw materials and other
21. intermediate products to enter a country duty free, its tariff 3. Rise in both Nominal and Effective tariff rates 1
policy generally results in a:

4. Fall in both Nominal and Effective tariff rates

5. -

1. Production of import substitution products increase

Factor inputs shift from products with comparative advantage to comparative

2.
disadvantage products

22. Import protection discourages exports. This is because: 3. Either (a) or (b) 4

4. Both (a) and (b)

5. -
23. An export tax will: 3
1. Benefit both domestic consumers and producers

2. Harm both domestic consumers and producers

 3. Benefit domestic consumers and harm domestic producers

4. Harm domestic consumers and benefit domestic producers

5. -

1. Straight line production frontier

2. Concave to the origin production frontier

With increasing returns to scale, which of the following would

24. 3. Convex to the origin production frontier 3
represent the production possibility frontier:

4. None of the above

5. -

1. Import replacing

2. Export replacing

Labour endowment growth in a large country leads to negative

25. 3. Export expanding 3
terms of terms if it is:

4. Import expanding

5. -

1. Positive income effect

2. Positive Terms of trade effect

Immiserizing growth is described as a situation where growth
26. leads to lower welfare. This happens because of which of the 3. Negative income effect 4
following:

4. Negative Terms of trade effect

5. -

1. Higher capital - labour ratio

2. Marginal productivity of labour rises relative to capital

27. Capital saving technology leads to which of the following: 3. Marginal productivity of capital rises relative to labour 2

4. Upward shift in Isoquant

5. -

1. Increase in endowment of one factor will increase the output by a greater proportion

2. Reduce the output of the other commodity

28. The Rybczynski Theorem postulates which of the following: 3. Both (a) and (b) 3

4. Either (a) or (b)

5. -

1. Returns to scarce factor increases

2. Returns to abundant factor increases

29. High tariff policy distorts factor prices. This is because: 3. Factor intensity increases 1

4. Factor abundance increases

5. -
30. A high tariff policy results in which of the following: 2
1. Countries specializing in products in which they have comparative advantage

2. Countries specializing in products in which they have comparative disadvantage

3. Maximise gains from trade

4. Eliminate all gains from trade

5. -
 1. -

2. -

31. - 3. - 0

4. -

5. -